Oil tops $80 a barrel on Iran deal fears

The pending US sanctions against Iran have also contributed to the price rise. "Plus we see a high likelihood of OPEC working with Russian Federation in 2019 to set a floor on oil prices". However, it's reported that prices for black gold may soar even higher, as an agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russian Federation, to slash output is still helping to reduce supply. Total entered into a three-way agreement to develop the South Pars area in Iran for oil and gas exploration.

Brent crude futures LCOc1 were at $79.40 per barrel at 0655 GMT, up 0.12 percent from their last close.

Oil settled higher Tuesday, with supply concerns tied to political unrest in the Middle East lifting prices for the global crude benchmark to its highest finish in 3 1/2 years.

Oil market supply deficit to average approximately 800,000 b/d in 2018.

"A similar reading from EIA today could relieve some of the upward pressure on prices and trigger some near-term profit taking", Craig Erlam, senior market strategist at OANDA said.

Asia's demand is at record highs and with rising prices its crude could cost $1 trillion this year, about twice what it paid during the market lull of 2015/2016.

Crude inventories fell by 1.4 million barrels in the week to May 11, compared with analysts' expectations for a decrease of 763,000 barrels.

A huge boom in oil prices over the past year - with prices rising 75 percent since last July - will also likely have an effect on demand. Markets face other disruptions besides Iran, with Venezuela's output plunging to the lowest since the 1950s as its economy unravels.

Despite Wednesday's dips and some indicators implying the financial oil has overshot physical oil, overall crude market conditions have tightened since 2017 when the Organization of the Petroleum Exporting Countries (OPEC) started to withhold supplies to push up oil prices. As the dollar strengthens, investors can retreat from dollar-denominated commodities like oil.

Non-OPEC supply this year now is forecast to grow by 1.7 million b/d y/y, with 89% from the United States. Growth in non-OPEC production offset production declines from OPEC members. "Oil stocks fell across the board and in some cases more than expected, whilst rising exports point to healthy demand for USA crude", Commerzbank analyst Carsten Fritsch said.

The API reported Tuesday that USA crude supplies rose by almost 4.9 million barrels for the week ended May 11.

OPEC, for its part, estimated that the excess oil inventories in the OECD had shrunk to just 9 million barrels.

This was the case with Drill, Baby, Drill the slogan, which proved to be popular and gained further prominence after it was used by Republican Vice Presidential nominee Sarah Palin in her debate with Joe Biden in the 2008 US Presidential elections.